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AirAsia Low Cost Leadership Analysis:

It was by 2009, that AirAsia was established as the most-successful low cost airline in Asia, but what makes AirAsia successful? We refer to why the unit costs are different between enterprises in the same sector, as in this case would be the airline industry, when their basic cost factors (such as technology, product design, productive process, capabilities) are very similar, if not the same.

This can be explained by using drivers of cost advantage:

Economies of Scale: AirAsia operates in a single type of aircraft, the Airbus A380, and also a single class. This helps with the economies in purchasing, maintenance, and aircraft utilization. Economies of learning:

Production techniques: Most the activities done by AirAsia are outsourced, third parties help the business activities run more efficiently and effectively. Also the Information Technology are also outsourced.

Product design: Ticketless. Passengers do not need to worry about collecting ticket before the flight and it is cost-efficient for AirAsia (printing, paper, distributing). This makes the job easier for both the parties.

Input cost: About 80% of ticket sales are generated from the AirAsia website. This is the most cost saving distribution systems. The airline does not pay any commission for the travel agent, which will affect the price. AirAsia also does not participate in the
Worldwide reservation system; thus save costs

Capacity Utilization: Information technology as such as computer reservation system (CRS) which is linked with AirAsia’s yield management system (YMS), that prices seats on every flights according to demand.

Residual efficiency: Employs staff with low wages. Most of the secondary important staffs are from India, Nepal and Bangladesh, which has low wages. The main hub is in Low cost carrier terminal in Malaysia, and

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